<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________ to ____________________
Commission file number 0-1026
WHITNEY HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana 72-6017893
______________________________________________________________
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
228 St. Charles Avenue, New Orleans, Louisiana 70130
______________________________________________________________
(Address of principal executive offices)
(Zip Code)
(504) 586-7272
______________________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
_____ _____
The Company has only one class of common stock, of which 14,563,681 shares
were outstanding on July 31, 1994.
An exhibit index appears on page 22.
Page 1 of 24
<PAGE>
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Page
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets..............................3
Consolidated Statements of Operations....................4
Consolidated Statements of Cash Flows....................5
Notes to Financial Statements............................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....................11
Part II. Other Information
Item 4. Submission of Matters to a vote of Security
Holders..........................................................21
Item 6. Exhibits and Reports on Form 8-K...............................22
Signature...................................................................24
</TABLE>
Page 2 of 24
<PAGE>
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
----------- ------------
<S> <C> <C>
ASSETS (unaudited)
Cash and due from financial institutions.......................................... $169,518 $187,447
Investment in securities:
Securities available for sale (at fair value)................................ 153,650 182,030
Securities held to maturity (fair value of $1,455,509 in 1994 and
$1,483,044 in 1993)..................................................... 1,478,517 1,451,716
Federal funds sold................................................................ 5,350 110,000
Loans............................................................................. 994,221 975,728
Less reserve for possible loan losses............................................. 41,403 44,485
----------- -----------
Loans, net..................................................................... 952,818 931,243
Bank premises and equipment, net.................................................. 63,220 60,175
Other real estate owned, net...................................................... 7,312 16,126
Accrued income receivable......................................................... 29,272 29,142
Other assets...................................................................... 41,937 34,661
TOTAL ASSETS............................................................ $2,901,594 $3,002,540
=========== ===========
LIABILITIES
Deposits:
Non-interest-bearing demand deposits......................................... $753,762 $784,410
Interest-bearing deposits.................................................... 1,671,338 1,720,893
----------- -----------
Total deposits........................................................... 2,425,100 2,505,303
Federal funds purchased and securities sold under repurchase agreements........... 176,775 215,168
Dividends payable................................................................. 2,184 1,925
Other liabilities................................................................. 20,456 21,106
----------- -----------
TOTAL LIABILITIES....................................................... $2,624,515 $2,743,502
SHAREHOLDERS' EQUITY
Common stock, no par value: 40,000,000 shares authorized, 15,223,191
shares issued and 14,562,687 shares outstanding in 1994, 15,123,535
shares issued and 14,446,957 shares outstanding in 1993, after
deduction of treasury stock................................................... $2,800 $2,800
Capital surplus................................................................... 50,178 47,897
Retained earnings................................................................. 233,365 212,533
Net unrealized gain(loss) on securities available for sale, net of tax
effect of $1,224 in 1994 and ($1,660) in 1993................................ (2,273) 3,083
----------- -----------
Total................................................................... 284,070 266,313
Treasury stock at cost, 660,504 shares in 1994 and 676,578 shares in
1993, and unearned restricted stock compensation............................... 6,991 7,275
----------- -----------
TOTAL SHAREHOLDERS' EQUITY.............................................. $277,079 $259,038
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY.............................................. $2,901,594 $3,002,540
=========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
Page 3 of 24
<TABLE>
<CAPTION>
For the 3 Months For the 6 Months
Ended June 30, Ended June 30,
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans....................................................... $20,164 $18,749 $38,244 $37,272
Interest and dividends on investments-
U.S. Treasury and agency securities........................................ 18,264 17,687 35,954 35,333
Mortgage-backed securities................................................. 2,610 3,282 5,335 6,494
Obligations of states and political subdivisions........................... 1,613 1,379 3,178 2,659
Federal Reserve and corporate securities................................... 590 594 1,190 1,209
Interest on federal funds sold................................................... 601 806 1,484 1,719
Interest on deposits in other financial institutions............................. - 26 - 26
----------- ----------- ----------- -----------
TOTAL................................................................ $43,842 $42,523 $85,385 $84,712
----------- ----------- ----------- -----------
INTEREST EXPENSE
Interest on deposits............................................................. $11,219 $10,684 $21,647 $21,737
Interest on federal funds purchased and securities
sold under repurchase agreement............................................ 1,734 1,512 3,527 3,174
----------- ----------- ----------- -----------
TOTAL................................................................ $12,953 $12,196 $25,174 $24,911
----------- ----------- ----------- -----------
Net interest income.............................................................. $30,889 $30,327 $60,211 $59,801
Provision for possible loan losses:
Expense of providing loss reserves........................................... - - - -
Loss reserve reduction....................................................... - (50,000) (10,000) (50,000)
----------- ----------- ----------- -----------
Net interest income after provision for possible loan losses..................... $30,889 $80,327 $70,211 $109,801
----------- ----------- ----------- -----------
NON-INTEREST INCOME
Gain on sale of securities....................................................... $44 - $44 -
Other non-interest income........................................................ 8,275 8,912 17,323 16,105
----------- ----------- ----------- -----------
TOTAL................................................................ $8,319 $8,912 $17,367 $16,105
----------- ----------- ----------- -----------
NON-INTEREST EXPENSE
Salaries and employee benefits................................................... $13,355 $11,860 $26,385 $23,488
Occupancy of bank premises, net.................................................. 1,667 1,488 3,333 3,051
Other non-interest expenses...................................................... 10,388 10,602 20,583 23,909
----------- ----------- ----------- -----------
TOTAL................................................................ $25,410 $23,950 $50,301 $50,448
----------- ----------- ----------- -----------
Income before income taxes and effect of accounting changes...................... $13,798 $65,289 $37,277 $75,458
Income tax expense............................................................... 4,324 21,585 12,086 24,636
----------- ----------- ----------- -----------
Income before effect of accounting changes....................................... $9,474 $43,704 $25,191 $50,822
Cumulative effect of accounting changes, net..................................... - - - 634
----------- ----------- ----------- -----------
Net income....................................................................... $9,474 $43,704 $25,191 $51,456
=========== =========== =========== ===========
EARNINGS PER SHARE:
Income before cumulative effect of accounting changes...................... $0.65 $3.03 $1.74 $3.52
Cumulative effect of accounting changes, net............................... - - - 0.05
----------- ----------- ----------- -----------
Net income.................................................................. $0.65 $3.03 $1.74 $3.57
=========== =========== =========== ===========
Weighted average number of
shares outstanding............................................................ 14,555,041 14,411,763 14,503,929 14,408,930
=========== =========== =========== ===========
The accompanying notes are an integrated part of these financial statements.
</TABLE>
Page 4 of 24
<PAGE>
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
<TABLE>
<CAPTION>
For the 6 Months
Ended June 30,
1994 1993
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................................ $ 25,191 $ 51,456
Adjustments to reconcile net income to cash provided by (used in)
operating activities:
Cumulative effects of accounting changes............................... - (634)
Depreciation........................................................... 3,142 2,937
Provision for (Reduction of) reserves for possible loan losses......... (10,000) (50,000)
Provision for (Reduction of) losses on OREO and other problem assets... (1,161) 1,267
Amortization of intangible assets and unearned restricted stock
compensation........................................................ 2,118 1,883
Amortization of premiums and discounts on investment securities, net... 7,159 6,206
(Gains) Losses on sales of OREO and other property..................... (2,898) (2,441)
(Gains) Losses on sales of securities.................................. (44) -
Deferred tax expense (benefit)......................................... 3,392 17,471
Increase (Decrease) in accrued income taxes............................ (1,729) 437
(Increase) Decrease in accrued income receivable and other assets...... (1,708) (2,353)
Increase (Decrease) in accrued expenses and other liabilities.......... 232 934
--------- ---------
Net cash provided by (used in) operating activities.................... 23,694 27,163
--------- ---------
Cash flows from investing activities:
Proceeds from maturities of investment securities held to maturity........ 650,476 580,699
Proceeds from maturities of investment securities available for sale...... 30,240 -
Proceeds from sales of investment securities held to maturity............. 10,064 -
Purchases of investment securities held to maturity....................... (683,502) (622,919)
Purchases of investment securities available for sale..................... (10,100) -
Net (increase) decrease in loans.......................................... 51,894 97,908
Net (increase) decrease in federal funds sold............................. 106,950 (8,425)
Proceeds from sales of OREO and other property............................ 10,574 19,624
Capital expenditures...................................................... (2,322) (2,609)
Net cash (paid) received in business acquisition.......................... 35,659 -
Other..................................................................... (1,409) (1,485)
--------- ---------
Net cash provided by (used in) investing activities....................... 198,524 62,793
--------- ---------
Cash flows from financing activities:
Net increase (decrease) in non-interest-bearing demand deposits........... (54,158) (88,278)
Net increase (decrease) in interest-bearing deposits other than
certificates of deposit................................................ (132,378) (28,113)
Net increase (decrease) in certificates of deposit........................ (11,458) (24,892)
Net increase (decrease) in federal funds purchased and securities sold
under repurchase agreements............................................ (38,443) (4,404)
Exercise of stock options................................................. 213 8
Sale of common stock under employee savings plan.......................... 171 -
Dividends paid............................................................ (4,094) (1,920)
--------- ---------
Net cash provided by (used in) financing activities....................... (240,147) (147,599)
--------- ---------
Net increase (decrease) in cash and cash equivalents......................... (17,929) (57,643)
Cash and cash equivalents at the beginning of the period..................... 187,447 218,226
--------- ---------
Cash and cash equivalents at the end of the period........................... $ 169,518 $ 160,583
========= =========
Interest income received..................................................... $ 85,872 $ 83,566
========= =========
Interest expense paid........................................................ $ 24,401 $ 24,858
========= =========
Net federal income taxes paid................................................ $ 10,423 $ 6,720
========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
Page 5 of 24
<PAGE>
WHITNEY HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Whitney Holding Corporation and its subsidiaries (the "Company") follow
accounting and reporting policies generally accepted within the banking
industry. The accompanying consolidated financial statements of the Company
include the accounts of its wholly-owned subsidiary Whitney National Bank (the
"Bank"). All adjustments have been made which, in the opinion of management,
are necessary to fairly state the financial results for the interim periods
presented.
Pursuant to rules and regulations of the Securities and Exchange
Commission, certain financial information and disclosures have been condensed
or omitted in preparing the consolidated financial statements presented in
this quarterly report on Form 10-Q. The Company recommends that these
financial statements be read in conjunction with the Company's annual report
on Form 10-K for the year ended December 31, 1993.
Certain balances in prior periods have been reclassified to conform with
this period's financial presentation.
(2) INVESTMENT IN SECURITIES
Effective December 31, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Under SFAS No. 115, debt securities which the
Company both positively intends and has the ability to hold to maturity are
carried at cost. These criteria are not considered satisfied when a security
is available to be sold in response to changes in market interest rates,
prepayment rates, liquidity needs or other reasons as part of an overall
asset/liability management strategy. Upon the adoption of SFAS No. 115,
investments in mortgage-backed securities were reclassified as securities
available for sale and are being reported at fair value. The tax-effected net
unrealized holding gain or loss on these securities is reported as a separate
component of shareholders' equity at June 30, 1994 and December 31, 1993. In
accordance with SFAS No. 115, financial statements for periods prior to
adoption have not been restated to reflect this change in accounting
principle.
Page 6 of 24
<PAGE>
(3) BUSINESS ACQUISITION
On March 31, 1994, the Bank purchased substantially all of the assets and
assumed the deposit accounts and certain other liabilities of Baton Rouge Bank
and Trust Company. Included in the tangible assets acquired, whose fair value
totalled approximately $118 million, were cash and cash items of $41 million,
investment securities and federal funds sold of $13 million, and $59 million
in commercial, real estate mortgage and personal loans, as well as six banking
offices in the Baton Rouge area. The deposits assumed included approximately
$24 million in non-interest-bearing demand deposits and $94 million in
interest-bearing transaction, savings and time deposit accounts. The
operating results from this acquisition are reflected in the consolidated
income statements beginning with the second quarter of 1994.
As part of the acquisition price, which totalled approximately $9
million, Whitney Holding Corporation issued 90,909 shares of its common stock
with a value of $2 million.
(4) EARNINGS PER SHARE
Earnings per share is calculated using the weighted average number of
shares outstanding during each period presented. Potentially dilutive common
stock equivalents consist of stock options which were granted to certain
officers and directors in current and prior periods. Incorporating these
common stock equivalents into the calculation of earnings per share using the
treasury method does not materially affect the reported result whether on a
primary or fully-diluted basis.
All share and per-share data in this quarterly report reflect the three-
for-two splits of the Company's stock that were effective February 22, 1993
and November 29, 1993.
Page 7 of 24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY
Whitney Holding Corporation earned $9.5 million or $0.65 per share for
the second quarter of 1994. For the second quarter of 1993 the Company
reported earnings of $10.7 million or $0.74 per share after tax but before the
effect of a $50 million reduction in the level of the Bank's reserve for
possible loan losses. Although net interest income showed a modest gain from
1993 to 1994, essential increases in salaries and employee benefits expense
between 1993 and 1994 and a decline in the net gain on sales of other real
estate owned recognized in 1994's second quarter led to an overall comparative
decrease in quarterly earnings. Second quarter 1993 net income totalled $43.7
million or $3.03 per share including the tax-effected reserve reduction.
There was no provision for possible loan losses or reduction in the level of
the loss reserve during the second quarter of 1994.
Excluding the effects of the $50 million loan loss reserve reduction in
1993's second quarter and the $10 million reserve reduction reported in the
first quarter of 1994, the Company's after-tax earnings of $18.7 million for
the first six months of 1994 are up slightly from the $18.5 million earned for
the same period of 1993. This represents per-share earnings of $1.29 for 1994
and $1.28 for 1993. Year to date, an increase in salaries and employee
benefits expense from 1993 to 1994 has been more than offset by current year
reductions in other non-interest expenses and improvements in both net
interest income and non-interest income. Including the tax-effected reserve
reductions, total net income for the first half of 1994 was $25.2 million or
$1.74 per share compared to $51.5 million or $3.57 per share for 1993.
The following compares the annualized return on average total assets and
the return on average shareholders' equity for the three-month and six-month
periods ended June 30, 1994 and 1993.
<TABLE>
<CAPTION>
<S> <C> <C>
1994 1993
_____ _____
Return on average assets:
Second quarter -
Total return 1.26% 2.66%
Return, before effect of reserve reduction 1.26% 1.50%
Year to date -
Total return 1.46% 2.42%
Return, before effect of reserve reduction 1.26% 1.50%
Return on average shareholders' equity:
Second quarter -
Total return 13.85% 38.65%
Return, before effect of reserve reduction 13.85% 21.86%
Year to date -
Total return 16.38% 38.08%
Return, before effect of reserve reduction 14.02% 18.96%
</TABLE>
Page 8 of 24
<PAGE>
Average earning assets for the quarter ended June 30, 1994, excluding
nonaccruing loans, totalled $2.69 billion, an increase of $159 million or 6.3%
from the total of $2.53 billion for the second quarter of 1993. This increase
reflects in part the impact of the Baton Rouge acquisition discussed below,
but it is also the result of the successful rehabilitation or liquidation of
non-performing assets and the reinvestment of operating cash flows. Year to
date, average earning assets, excluding nonaccruing loans, have increased $145
million or 5.7% to $2.68 billion in 1994 from $2.53 billion in 1993.
Non-performing assets decreased $32.9 million, or approximately 53%, from
$62.3 million on June 30, 1993, to $29.4 million on June 30, 1994. Since
December 31, 1993, non-performing assets have been reduced some $20.5 million
or 41%. The reserve for possible loan losses, after the $10 million reduction
in the first quarter of 1994, was $41.4 million on June 30, 1994, an amount
which represented 188% of non-performing loans and 4.2% of total loans. At
year end 1993, the reserve coverage was 132% of non-performing loans and 4.6%
of total loans on that date.
Average loans outstanding were $976 million for the second quarter of
1994 compared to $922 million for 1994's first quarter and $957 million for
the second quarter of 1993. Although the loan growth exhibited in the second
quarter of 1994, after a series of fairly steady quarterly declines in recent
years, is largely attributable to the Baton Rouge acquisition, it also
reflects a moderate strengthening of demand for both commercial and consumer
credit in the Company's market area.
Average total deposits in the second quarter of 1994 were $2.50 billion.
This represents an increase of $57 million over 1994's first quarter and an
increase of $94 million over the second quarter of 1993. Excluding the
deposits acquired in the Baton Rouge transaction, second quarter 1994 average
deposits have declined from the first quarter of the year, reflecting both
seasonal fluctuations as well as the disintermediation of some deposit funds
to higher yielding alternatives with the rise in market rates experienced in
the first half of 1994.
The Company's average investment in securities totalled $1.68 billion for
the second quarter of 1994, slightly above the $1.66 billion total for the
first quarter of the year. When compared to the second quarter of 1993,
average investments in 1994's second quarter have increased $161 million or
10.6%. Funds not needed to meet loan demand in recent years have become
available to purchase investment securities.
Page 9 of 24
<PAGE>
On March 31, 1994, the Bank purchased substantially all of the assets and
assumed the deposit accounts and certain other liabilities of Baton Rouge Bank
and Trust Company. Included in the acquired assets, which totalled
approximately $118 million, were $59 million in commercial, real estate
mortgage and personal loans, and six banking offices in the Baton Rouge area.
The deposits assumed included approximately $24 million in non-interest-
bearing demand deposits and $94 million in interest-bearing transaction,
savings and time deposit accounts. All six branch locations have been
integrated into the Whitney Bank system.
As part of the acquisition price, Whitney Holding Corporation issued
90,909 shares of its common stock.
The Company has declared cash dividends of $0.15 per share for each of
the first two quarters of 1994.
Page 10 of 24
<PAGE>
FINANCIAL CONDITION
Loans
Ignoring certain seasonal fluctuations, quarterly average loan balances
had declined fairly consistently in recent years through the first quarter of
1994. Economic conditions in the Company's market area, which is primarily
southern Louisiana and Mississippi, were reflected in weak overall loan demand
over these periods and in efforts by many commercial loan customers to reduce
their existing debt levels. In recent years, the Bank also consciously
reduced its exposure to credits whose performance had been adversely affected
by these economic conditions. These factors are still evident in the decrease
in year-to-date average loans outstanding of approximately $20 million from
the first half of 1993 to the comparable period of 1994, including the Baton
Rouge acquisition in 1994.
With the Baton Rouge acquisition, and with both an improving regional
economy and a more aggressive effort to market the Bank's retail and
commercial loan products, the Company was able to report growth in average
loans outstanding for the second quarter of 1994 of $54 million when compared
to the first quarter of the current year and $18 million when compared to
1993's second quarter, even as the Bank continued to reduce its non-performing
loans. Total loans outstanding of $994 million at June 30, 1994 were $18
million above the total of $976 million outstanding at December 31, 1993.
This increase is smaller than the growth in average loans between the first
and second quarters of 1994 primarily as a result of seasonal fluctuations in
the credit needs of certain industries serviced by the Bank.
Deposits
With the addition of the deposits acquired in the Baton Rouge
transaction, the Company's average total deposits have increased $94 million
to $2.50 billion for second quarter of 1994 compared with $2.41 billion for
the same period in 1993. For the first six months of 1994, average total
deposits have increased $54 million from 1993.
As is shown in Table 1, average non-interest-bearing demand deposits have
risen $50 million or 7% to $769 million in the second quarter of 1994 from
$719 million in 1993. Year to date, such demand deposits have increased $40
million or 5.5%. For each comparative period, the growth in this deposit
category has exceeded the amount attributable to the Baton Rouge acquisition.
Table 1 also shows that average time deposits, which includes both core
deposits and certificates of deposit of $100,000 and over, increased $49
million between the second quarters of 1993 and 1994 and $27 million between
the comparable year-to-date periods. Core certificates of deposit of under
$100,000 exhibited the most significant growth within the time category. The
increases in time deposits are consistent with the expected impact of the
Baton Rouge transaction.
Average interest-bearing demand and money market account deposits
decreased from the second quarter and first half of 1993 to the comparable
periods in 1994, despite the addition of approximately $30 million to these
deposit categories from the Baton Rouge transaction. These changes have
resulted in part from the increasing attractiveness of alternative investment
opportunities in 1994 as market rates have risen.
Page 11 of 24
<PAGE>
Investment in Securities
The Company's total investment in securities was $1.63 billion at June
30, 1994, essentially unchanged from the total at December 31, 1993. The
average investment in securities of approximately $1.68 billion for both the
second quarter and year-to-date periods in 1994 represented 62% of total
interest-earning assets during these periods, up from approximately 58% during
the comparable periods in 1993. As shown in Table 1, the major portion of the
increased investment activity of approximately $160 million for both the
quarterly and year-to-date periods in 1994 was directed to U. S. Treasury and
government agency securities, excluding mortgage-backed issues. The mix of
period-end and average investments has remained relatively stable, with
Treasury and agency securities representing approximately 80% of the totals.
The weighted-average maturity of the overall portfolio of securities was
30 months at June 30, 1994, down from 35 months at June 30, 1993. The
weighted-average taxable-equivalent portfolio yield for the second quarter of
1994 was 5.72%, which was slightly higher than the 5.69% yield in 1994's first
quarter but 53 basis points below the 6.25% yield in the second quarter of
1993.
Asset Quality
Overall asset quality has exhibited a trend of steady improvement over
the past several years. As is shown in Table 3, during the second quarter of
1994, the Bank continued to be successful in its efforts to reduce all
categories of its non-performing assets through the full rehabilitation of
nonaccruing loans, the workout of troubled credits, or the sale of repossessed
loan collateral.
Non-performing assets totalled $29.4 million at June 30, 1994, some $20.5
million or 41% below the $49.9 million total at year end 1993 and $32.9
million or 53% lower than the total from a year earlier. For the second
quarter of 1994, the Bank was successful in recovering $2.3 million of
previously charged-off loans, while at the same time identifying only $300
thousand of loans to be charged off. The net recovery of $2.0 million was
down slightly from the $2.1 million in net recoveries for the second quarter
of 1993. As is shown in Table 2, year to date the Company is in a net
recovery position of $6.9 million through June 30, 1994, an improvement of
approximately $6.0 million over 1993.
The reserve for possible loan losses is maintained at a level believed by
management to be adequate to absorb potential losses in the portfolio. No
additional provision for losses or reduction in the level of the reserve was
determined by management to be necessary during the second quarter of 1994.
The $10 million reduction in the reserve during the first quarter of 1994 and
the $50 million reduction in 1993's second quarter reflected the continuing
improvement in overall asset quality and management's determination that
efforts to deal with asset quality issues have yielded lasting positive
results. The reserve for possible loan losses represented 188% of non-
performing loans at June 30, 1994. At year end 1993 this reserve coverage was
132%.
Page 12 of 24
<PAGE>
The Bank has several property interests which were acquired through
routine banking transactions generally prior to 1933 and which are recorded in
its financial records at a nominal value. Management continually investigates
ways to maximize the return on these assets. No significant dispositions of
these property interests were made during the year ended December 31, 1993 or
the first six months of 1994. Future dispositions may result in the
recognition of substantial gains.
<PAGE>
Capital Adequacy
The strong earnings reported for the six months of 1994, including the
effect of the reduction in the reserve for loan losses, are reflected in the
increase in the Company's and the Bank's regulatory risk-based capital ratios
between December 31, 1993 and June 30, 1994. The total of risk-weighted
assets used in the capital ratio calculations has remained essentially
unchanged, although there has been some shift in the asset mix to loans which
generally are assigned a risk-weighting higher than for the Company's
investment securities. For purposes of these calculations, capital does not
currently include the net unrealized gain or loss on securities available for
sale which is reported as a separate component of shareholders' equity.
The Company's regulatory capital ratios, which are essentially the same
as those calculated for the Bank, are shown here compared to the minimums
currently required for regulatory classification as a "well capitalized"
institution:
<TABLE>
<CAPTION>
Required for
June 30, December 31, well-capitalized
1994 1993 institution
________ ____________ ________________
<S> <C> <C> <C>
Tier 1 risk-based
capital ratio 20.18% 18.92% 6.00%
Total risk-based
capital ratio 21.46% 20.19% 10.00%
Tier 1 leverage
capital ratio 9.10% 8.23% 5.00%
</TABLE>
Page 13 of 24
<PAGE>
RESULTS OF OPERATIONS
Net Interest Income
Taxable-equivalent net interest income for the second quarter and first
six months of 1994 has shown a modest increase from the comparable periods in
1993. In comparison to the first quarter of the current year, second quarter
1994 net interest income has increased $1.8 million or 5.9% and the net
interest margin has risen 20 basis points. Comparing 1994 and 1993, the
current year net interest margin has shown a decline both in the second
quarter, from 4.83% to 4.71%, and for the year-to-date period, from 4.75% to
4.61%. A combination of factors contributed to these changes, the components
of which are detailed in Table 1.
Interest income showed an increase in the second quarter of 1994 when
compared to 1993 of $1.5 million. The rise in the loan portfolio's effective
yield, which includes cash basis income recognized on nonaccruing loans, and
the $159 million overall increase in average earning assets from the second
quarter of 1993 to the second quarter of 1994, both contributed to the
increase in interest income. The effective yield on the investment securities
portfolio, while gradually increasing in 1994, is not as immediately
responsive to rising market rates as are loan yields. This investment
portfolio yield was 5.72% in the second quarter of 1994 as compared to 6.25%
in 1993, a decrease which reflects the continuing impact of the falling rate
environment that had prevailed in recent years. Year-to-date interest income
through June 30, 1994 is also up from the comparable period in 1993, by
approximately $1 million. Similar factors contributed to both the quarterly
and year-to-date increases.
Interest expense increased $757 thousand for the second quarter of 1994
as compared to 1993. This increase reflects the impact of the rising market
rate environment during 1994, the growth in average interest-bearing deposits,
and a shift in the deposit mix toward core time deposits from other lower cost
deposit categories, a shift which is partly attributable to the Baton Rouge
acquisition. Year-to-date interest expense in 1994 has increased only $263
thousand from the comparable period of 1993.
Other Income and Expense
Non-interest income for the second quarter of 1994 was $8.3 million, a
decrease of approximately $600 thousand or 6.7% from the $8.9 million reported
for the second quarter of 1993. Fee income, including income from service
charges on deposit accounts, trust services, credit card and mortgage-banking
operations and international banking services, showed a net increase of
approximately $300 thousand for the 1994 quarter compared to 1993. The net
gain recognized of sales of other real estate owned ("OREO") in 1994's second
quarter, however, was $700 below that recognized in the same quarter of 1993.
Year to date, non-interest income has increased by $1.3 million or 7.8% from
1993 to 1994. Fee income contributed approximately $1 million to this
increase, while the net gain on OREO sales recognized during the first half of
1994 was approximately $400 thousand above 1993's total.
Page 14 of 24
<PAGE>
Total non-interest expense increased approximately $1.5 million or 6.1%
to $25.4 million for the second quarter of 1994 from $24.0 million in the
second quarter of 1993, while year-to-date non-interest expense was virtually
unchanged.
Salaries and employee benefits expense totalled approximately $13.4
million for the second quarter of 1994 compared to $11.9 million for the
second quarter of 1993, an increase of $1.5 million or 12.6%. Year to date,
there was a $2.9 million increase in this expense category. The 401(k)
employee savings plan implemented in the fourth quarter of 1993, the Baton
Rouge acquisition, merit pay increases and various employee and management
incentives as well as staff additions and changes were responsible for these
increases.
For the second quarter and first six months of 1994, the Company was in a
net recovery position of approximately $1.2 million with respect to provisions
for losses on OREO and other problem assets. When compared to the net
recovery or expense provision recognized in 1993, this represents a decrease
in 1994 in other non-interest expense of approximately $360 thousand for the
quarterly period and $2.4 million year to date.
Excluding net recoveries or provisions for losses on problem assets,
other non-interest expense in 1994 was slightly above 1993 for the second
quarter and approximately $900 thousand below 1993 for the first six months.
The recovery of legal fees in connection with the resolution of problem assets
in the first quarter of 1994 was the largest contributor to the year-to-date
decrease. The expense of regulatory fees and assessments has also decreased
in 1994 from the prior year, by approximately $700 thousand through the first
six months. With the Company's recent strong financial results, however,
there has been an increase of approximately $500 thousand in the expense for
state ad valorem tax that is calculated in part based on the Company's equity
and earnings.
Income Taxes
Excluding the reductions in the reserve for possible loan losses which
were taxed at 35% in 1994 and 34% in 1993, the Company provided for income
taxes at an effective rate of 31.5% in the first half of 1994, up from 30.0%
for the comparable period of 1993. The effective rates in each period differ
from the statutory rates of 35% in 1994 and 34% in 1993 primarily because of
the tax exempt income earned on investments in state and municipal
obligations. The higher effective rate in 1994 is largely the result of a
lower proportion of tax-exempt to pre-tax income for 1994 compared to 1993.
The Company reviews its estimated annual effective tax rate throughout the
year.
The tax effect of the loan loss reserve reduction in the first quarter of
1994 served to decrease the Company's net deferred tax asset by $3.5 million.
The net deferred tax asset is included with other assets in the consolidated
balance sheets.
Page 15 of 24
<PAGE>
Accounting Changes
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions," and SFAS No. 109, "Accounting for Income Taxes," both effective as
of January 1, 1993. Recording the cumulative effects of these accounting
changes resulted in a nonrecurring increase in net income of $634,000 for the
first quarter and first six months of 1993. Further details concerning these
accounting changes are provided in the Company's report on Form 10-Q for the
quarter ended March 31, 1993, and in its report on Form 10-K for the year
ended December 31, 1993.
Effective December 31, 1993, the Company adopted SFAS No. 115 "Accounting
for Certain Investments in Debt and Equity Securities." The statement
specifies criteria for classifying investments as either trading securities,
securities held to maturity, or securities available for sale, and establishes
reporting standards for each classification.
Management considered the Company's existing investment portfolio and
underlying asset/liability management policies and strategies in light of the
new standard and determined that its investments in mortgage-backed securities
met the criteria for classification as securities available for sale. These
securities have been reported at their estimated fair values at June 30, 1994
and December 31, 1993. The tax-effected net unrealized holding gain or loss
on these securities is reported as a separate component of shareholders'
equity in the consolidated balance sheets. The remaining portfolio of
securities has been classified as held to maturity and continues to be
reported at amortized cost. The Company currently maintains no trading
portfolio.
Page 16 of 24
<PAGE>
LIQUIDITY AND OTHER MATTERS
Liquidity
The Company and the Bank manage liquidity to ensure their ability to
satisfy customer demand for credit, to fund deposit withdrawals, to meet
operating and other corporate obligations, and to take advantage of investment
opportunities, all in a timely and cost-effective manner. Traditionally,
these liquidity needs have been met by maintaining a strong base of core
deposits within the Bank and by carefully managing the maturity structure of
the Bank's investment portfolio. The funds provided by current operations and
forecasts of loan repayments are also considered in the liquidity management
process.
The Bank enters into short-term borrowing arrangements by purchasing
federal funds and selling securities under repurchase agreements, mainly as
part of its services to correspondent banks and certain other customers.
Neither the Company nor the Bank has had to access short or long term debt
markets as part of liquidity management.
Average core deposits, defined as all deposits other than time deposits
of $100,000 or more, grew some $84 million from $2.17 billion in the first
quarter of 1993 to $2.26 billion in 1994's second quarter, reflecting in part
the Baton Rouge acquisition. Core deposits comprised approximately 90% of
total average deposits for both of these periods.
As of June 30, 1994, $321 million or 19.7% of the overall investment
securities portfolio, including securities available for sale, was scheduled
to mature within one year. Securities maturing within one year as of December
31, 1993, totalled $330 million or 20.2% of the investment portfolio at that
date.
The Bank had $457 million in unfunded loan commitments outstanding at
June 30, 1994, an increase of $58 million from the level at December 31, 1993.
Contingent obligations under letters of credit and financial guarantees
increased slightly from year end 1993 to a total of $61 million at June 30,
1994. Available credit card lines were $27 million at the end of the second
quarter, essentially unchanged from year end 1993. Draws under these
financial commitments should not place any unusual strain on the Company's
liquidity position.
Page 17 of 24
<PAGE>
TABLE 1.
WHITNEY HOLDING CORPORATION
ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE
(dollars in thousands, unaudited)
<TABLE>
<CAPTION>
Second Quarter Ended June 30,
--------------------------------------------------------------
1994 1993
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
----------- --------- ------ ----------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans (tax equivalent) (1),(2)................ $975,666 $20,328 8.35 % $957,175 $18,859 7.90 %
U. S. Treasury securities..................... $1,030,646 $13,760 5.36 % $879,400 $12,904 5.89 %
U.S. government agency securities............. 324,056 4,504 5.56 312,784 4,783 6.12
Mortgage-backed securities (3)................ 161,744 2,610 6.39 193,671 3,282 6.78
State and municipal securities
(tax equivalent) (1)..................... 121,520 2,482 8.17 96,395 2,089 8.67
Corporate bonds and other securities.......... 38,415 590 6.14 32,724 594 7.26
----------- --------- ------ ----------- --------- ------
Total investment in securities.............. $1,676,381 $23,946 5.72 % $1,514,974 $23,652 6.25 %
----------- --------- ------ ----------- --------- ------
Federal funds sold............................ 61,861 601 3.90 % 108,635 806 2.98 %
Interest-bearing deposits..................... - - - 3,407 26 3.05
----------- --------- ------ ----------- --------- ------
Total interest-earning assets............... $2,713,908 $44,875 6.62 % $2,584,191 $43,343 6.72 %
----------- --------- ------ ----------- --------- ------
Cash and due from financial institutions...... 190,417 185,030
Bank premises and equipment, net.............. 63,128 62,225
Other real estate owned, net.................. 11,678 31,718
Other assets.................................. 74,144 91,635
Reserve for possible loan losses.............. (40,431) (98,539)
----------- -----------
Total assets................................ $3,012,844 $2,856,260
=========== ===========
LIABILITIES
Savings deposits.............................. $554,694 $3,724 2.69 % $548,203 $3,675 2.69 %
NOW and MMDA deposits......................... 603,381 2,703 1.80 615,690 3,147 2.05
Time deposits................................. 575,496 4,792 3.34 526,045 3,862 2.94
----------- --------- ------ ----------- --------- ------
Total interest-bearing deposits............. $1,733,571 $11,219 2.60 % $1,689,938 $10,684 2.54 %
----------- --------- ------ ----------- --------- ------
Federal funds purchased and
repurchase agreements....................... 208,114 1,734 3.34 % 219,955 1,512 2.76 %
----------- --------- ------ ----------- --------- ------
Total interest-bearing liabilities.......... $1,941,685 $12,953 2.68 % $1,909,893 $12,196 2.56 %
----------- --------- ------ ----------- --------- ------
Demand deposits, non-interest-bearing......... 769,459 719,166
Other liabilities............................. 27,418 30,758
Shareholders' equity.......................... 274,282 196,443
----------- -----------
Total liabilities and shareholders'
equity................................... $3,012,844 $2,856,260
=========== ===========
Net interest income/margin
(tax equivalent) (1).................... $31,922 4.71 % $31,147 4.83 %
========= ====== ========= ======
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------------------------------
1994 1993
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
----------- --------- ------ ----------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans (tax equivalent) (1),(2)................ $948,763 $38,386 8.15 % $968,277 $37,432 7.79 %
U. S. Treasury securities..................... $1,000,934 $26,770 5.39 % $856,443 $25,433 5.99 %
U.S. government agency securities............. 342,886 9,184 5.36 337,126 9,900 5.87
Mortgage-backed securities (3)................ 168,347 5,335 6.40 189,672 6,494 6.85
State and municipal securities
(tax equivalent) (1)..................... 119,116 4,890 8.21 91,455 4,029 8.81
Corporate bonds and other securities.......... 38,423 1,190 6.19 32,815 1,209 7.37
----------- --------- ------ ----------- --------- ------
Total investment in securities.............. $1,669,706 $47,369 5.71 % $1,507,511 $47,065 6.27 %
----------- --------- ------ ----------- --------- ------
Federal funds sold............................ 87,397 1,484 3.42 % 116,252 1,719 2.98 %
Interest-bearing deposits..................... - - - 1,713 26 3.04
----------- --------- ------ ----------- --------- ------
Total interest-earning assets............... $2,705,866 $87,239 6.49 % $2,593,753 $86,242 6.69 %
----------- --------- ------ ----------- --------- ------
Cash and due from financial institutions...... 191,531 188,755
Bank premises and equipment, net.............. 61,450 62,379
Other real estate owned, net.................. 13,827 36,177
Other assets.................................. 71,477 88,190
Reserve for possible loan losses.............. (43,225) (99,223)
----------- -----------
Total assets................................ $3,000,926 $2,870,031
=========== ===========
LIABILITIES
Savings deposits.............................. $558,789 $7,495 2.70 % $547,982 $7,608 2.80 %
NOW and MMDA deposits......................... 596,232 5,313 1.80 620,232 6,422 2.09
Time deposits................................. 554,831 8,839 3.21 527,989 7,707 2.94
----------- --------- ------ ----------- --------- ------
Total interest-bearing deposits............. $1,709,852 $21,647 2.55 % $1,696,203 $21,737 2.58 %
----------- --------- ------ ----------- --------- ------
Federal funds purchased and
repurchase agreements....................... 231,305 3,527 3.07 % 231,448 3,174 2.77 %
----------- --------- ------ ----------- --------- ------
Total interest-bearing liabilities.......... $1,941,157 $25,174 2.62 % $1,927,651 $24,911 2.61 %
----------- --------- ------ ----------- --------- ------
Demand deposits, non-interest-bearing......... 764,446 723,609
Other liabilities............................. 26,406 25,924
Shareholders' equity.......................... 268,917 192,847
----------- -----------
Total liabilities and shareholders'
equity................................... $3,000,926 $2,870,031
=========== ===========
Net interest income/margin
(tax equivalent) (1).................... $62,065 4.61 % $61,331 4.75 %
========= ====== ========= ======
<FN>
(1) Tax equivalent amounts are calculated using a marginal federal income tax rate of 35% for 1994 and 34%
for 1993.
(2) Average balance includes nonaccruing loans of $24,473 and $53,689 for the second quarters and $27,975
and $60,559 for the six month periods in 1994 and 1993, respectively.
(3) Average balance in 1994 includes unrealized gain (loss) on securities available for sale of ($1,548)
for the quarter and $1,579 for the six month period. These gains (losses) are excluded in calculating
yields.
</TABLE>
Page 18 of 24
<PAGE>
TABLE 2
WHITNEY HOLDING CORPORATION
RESERVE FOR POSSIBLE LOAN LOSSES
(by quarter, in millions, unaudited)
<TABLE>
<CAPTION>
1994 1993 1992
------------- --------------------------- ----------------------
2nd 1st 4th 3rd 2nd 1st 4th 3rd 2nd
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Reserve, beginning of quarter........... $39.4 $44.5 $42.0 $49.6 $97.5 $98.6 $100.3 $101.5 $103.2
Provision for possible loan losses:
Expense of providing loss reserves.. - - - - - - - 0.8 2.6
Reduction of loss reserves.......... - (10.0) - (10.0) (50.0) - - - -
Loans charged off....................... (0.3) (1.5) (1.0) (0.7) (0.9) (3.8) (4.2) (4.3) (7.4)
Recoveries.............................. 2.3 6.4 3.5 3.1 3.0 2.7 2.5 2.3 3.1
------ ------ ------ ------ ------ ------ ------ ------ ------
Reserve, end of quarter................. $41.4 $39.4 $44.5 $42.0 $49.6 $97.5 $98.6 $100.3 $101.5
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
Page 19 of 24
<PAGE>
TABLE 3
WHITNEY HOLDING CORPORATION
NON-PERFORMING ASSETS AND OTHER SELECTED DATA
(end of quarter, dollars in millions, unaudited)
<TABLE>
<CAPTION>
1994 1993 1992
------------- --------------------------- ----------------------
2nd 1st 4th 3rd 2nd 1st 4th 3rd 2nd
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Non-performing loans........................ $22.0 $26.4 $33.6 $34.8 $39.8 $58.0 $70.6 $95.0 $114.1
Other real estate owned, net................ 7.4 13.4 16.1 18.0 22.3 37.5 40.2 52.5 60.2
Other foreclosed assets..................... - - 0.2 0.2 0.2 0.3 0.4 1.4 2.6
------ ------ ------ ------ ------ ------ ------ ------ ------
Total non-performing assets................. $29.4 $39.8 $49.9 $53.0 $62.3 $95.8 $111.2 $148.9 $176.9
====== ====== ====== ====== ====== ====== ====== ====== ======
Net gain (loss) on sales of OREO............ $1.1 $1.8 $0.8 $0.3 $1.8 $0.7 $0.3 $0.1 $0.3
====== ====== ====== ====== ====== ====== ====== ====== ======
Reserve for possible
loan losses as a percent of:
Total non-performing loans............... 188% 149% 132% 121% 125% 168% 140% 106% 89%
Total loans.............................. 4.2% 4.0% 4.6% 4.6% 5.2% 10.0% 9.4% 9.0% 8.8%
Non-performing loans as a percent of
total loans.............................. 2.21% 2.70% 3.45% 3.80% 4.20% 6.12% 6.75% 8.91% 10.2%
Non-performing assets as a percent of
total assets............................. 1.01% 1.28% 1.66% 1.85% 2.18% 3.33% 3.77% 5.33% 6.37%
</TABLE>
Page 20 of 24
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of shareholders on April 27, 1994.
At the meeting, the shareholders elected the nominee for director presented in
the Company's proxy statement dated March 24, 1994. The votes for the nominee
are set forth below, together with the term to which the nominee was elected:
<TABLE>
<CAPTION>
NOMINEE TERM FOR WITHHELD
_______ __________ __________ ________
<S> <C> <C> <C>
Harry J. Blumenthal, Jr. Five years 10,686,107 97,933
</TABLE>
The shareholders also approved the proposal described in the Company's
proxy statement respecting the adoption of the Whitney Holding Corporation
Directors' Compensation Plan which amends and restates, in its entirety, the
Unfunded Plan of Deferred Compensation for Directors of Whitney National Bank
which was first adopted as of November 21, 1990. The Plan provides for the
annual award of common stock and nonqualified stock options to each Director
and for the voluntary deferral of all or a portion of the fees otherwise
payable annually to each Director.
The voting results on this proposal were as follows: FOR, 10,100,014;
AGAINST, 578,852; ABSTENTIONS AND BROKER NONVOTES, 105,174.
The Shareholders also ratified the selection of Arthur Andersen & Co. as
the Company's auditors for fiscal year 1994, by a vote of 10,703,024 for,
58,386 against, and 22,630 abstentions and broker nonvotes.
Page 21 of 24
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 10.1 - Agreement between Whitney Holding Corporation, Whitney
National Bank and William L. Marks, incorporated by reference to the
Company's 1990 Form 10-K
Exhibit 10.2 - Stock Option Agreement between Whitney Holding
Corporation and William L. Marks, incorporated by reference to the
Company's 1990 Form 10-K
Exhibit 10.3 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and William L. Marks, incorporated by reference to
the Company's June 30, 1993 Form 10-Q
Exhibit 10.4 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and R. King Milling, incorporated by reference to
the Company's June 30, 1993 Form 10-Q
Exhibit 10.5 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and Edward B. Grimball, incorporated by reference
to the Company's June 30, 1993 Form 10-Q
Exhibit 10.6 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and Kenneth A. Lawder, Jr., incorporated by
reference to the Company's June 30, 1993 Form 10-Q
Exhibit 10.7 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and G. Blair Ferguson, effective July 1, 1993,
incorporated by reference to the Company's September 30, 1993 Form 10-Q.
Exhibit 10.8 - Executive agreement between Whitney Holding Corporation,
Whitney National Bank and Joseph W. May, effective December 13, 1993,
incorporated by reference to the Company's 1993 Form 10-K.
Exhibit 10.9 - Long-term incentive program, incorporated by reference to
the Company's 1991 Form 10-K
Exhibit 10.10 - Executive compensation plan, incorporated by reference
to the Company's 1991 Form 10-K
Page 22 of 24
<PAGE>
Exhibit 10.11 - Form of restricted stock agreement between Whitney
Holding Corporation and certain of its officers, incorporated by
reference to the Company's June 30, 1992 Form 10-Q
Exhibit 10.12 - Form of stock option agreement between Whitney Holding
Corporation and certain of its officers, incorporated by reference to
the Company's June 30, 1992 Form 10-Q
Exhibit 10.13 - Directors' Compensation Plan, incorporated by reference
to the Company's Proxy Statement dated March 24, 1994
(b)There were no reports filed on Form 8-K during the quarter for which
this report is filed.
Page 23 of 24
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934 the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WHITNEY HOLDING CORPORATION
(Registrant)
Date: August 5, 1995 By: /s/ Edward B. Grimball
_______________ _______________________________
Edward B. Grimball
Executive Vice President &
Chief Financial Officer
Page 24 of 24
